Don’t hold drugmakers liable for competitors’ generics

The California Supreme Court’s recent decision not to review Conte vs. Wyeth leaves name-brand drug manufacturers liable for harm caused by another manufacturer’s generic version of its drug. This unprecedented and unfair extension of product liability spells bad news for innovators and consumers alike.

Plaintiff Elizabeth Conte took a generic version of Reglan, a heartburn medication originally manufactured by Wyeth Pharmaceuticals and approved for 12 weeks of use. She took the generic drug for nearly four years and claimed she developed the movement disorder tardive dyskinesia. Conte originally sued the generic manufacturer, who made the product she actually took, but the San Francisco Superior Court dismissed her lawsuit.

In November, California’s 1st District Court of Appeal ruled that it is “foreseeable” that Conte’s physician might have relied on labeling information from Wyeth, the pioneer manufacturer of the drug she didn’t take, whom Conte sued for labeling fraud and misrepresentation. The appellate court allowed Conte to sue Wyeth. On Jan. 21, the California Supreme Court refused to review the appellate decision, allowing Conte’s lawsuit against Wyeth to proceed and extending product liability far beyond usual boundaries.

Traditional tort law holds that manufacturers are responsible for their own products, not those made by competitors. Conte, which is essentially California law now, holds manufacturers responsible for the products of competitors, which they are powerless to do anything about. This unfair decision has stunned observers and drawn warnings of negative consequences.

Conte-style liability, said the Drug and Device Law blog, “will inevitably serve as a lead weight around the ankles of the companies that invented the most significant breakthrough products.” The Conte ruling “expands liability to deep-pocket defendants, while letting free riders — whose conduct probably should subject them to liability — off the hook.” And it gets worse.

Courts, politicians and regulatory bodies do not discover or manufacture lifesaving medicines. Pharmaceutical innovators do, at great expense and after a long approval process by the Food and Drug Administration. Pharmaceutical innovators also must deal with theft of intellectual property, the reimportation of their products and outright piracy. Adding to these rigors, the unprecedented liability from Conte will discourage the innovation that produced the new medicines in the first place.

In the future, when new medicines do appear, Conte guarantees they will cost more. Imposing limitless liability on pioneer manufacturers for products they don’t make or sell means that the original innovators must recoup liability expenses somewhere else. The only place is as a markup on their drugs.

Those higher prices will make life more difficult for Americans who must purchase lifesaving medications on fixed incomes.

Conte will also cause an avalanche of costly, abusive lawsuits at a time when tort reform is needed in California to make the state’s economy more competitive. California had the highest tort losses of any state in 2006, nearly $20 billion, and it had the 11th-worst overall tort rules, according to the Pacific Research Institute’s 2008 U.S. Tort Liability Index.

Conte is bad law, bad public policy and a national embarrassment that will cost California and the nation jobs and new medicines. The lower San Francisco court showed more common sense than California’s high court, which seems afflicted by shortsighted-itis. This condition renders justices unable to see the bad consequences of their actions. There’s no drug for it — not even a generic.

Lawrence J. McQuillan is director of business and economic studies at the Pacific Research Institute, where K. Lloyd Billingsley is editorial director. They wrote this article for the Mercury News.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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